“The best investment on Earth is Earth”
– Louis Glickman, Philanthropist and Entreprenuer
In the recent years NRI investments in Real Estate has grown steadily.
Year NRI Remittances
An estimated 60 million NRIs residing in 160 countries look favorably to invest in India.
Encouraged by the overwhelming response the Indian Government has eased regulations to promote such investments.
Indian Government Regulations/Incentives
Recently the Government of India approved a bill allowing investments made by NRIs to be deemed as domestic investment on par with residents. NRI term here includes OCI cardholders as well as PIO cardholders.
Reserve Bank of India (RBI) has considerably eased investment norms for NRIs/PIOs in real estate. Now NRIs can buy, sell, gift and inherit immovable property. Only agricultural land, plantation property and farmhouse are excluded. The sale proceeds of immovable property can be repatriated for up to two residential units. In addition, the income and sale proceeds of assets held abroad by NRIs need not be repatriated to Indian and can be retained to be invested outside of India.
Wealth tax has been abolished. The Cost inflation index will enable the NRIs to minimize capital gains as well. For e.g. if an NRI sells a plot of land bought at Rs. 1 million in the year 1978 for Rs. 4 million in 2012-13, the resulting capital gain is Rs. 3 million liable for tax. However the indexed cost price would be Rs. 8.5 million leading to complete exemption from tax.
The Indian government announced “Housing for all by 2022” scheme to address housing shortage in the country. There are plans for building 100 smart cities with integrated development and allocated Rs. 48,000 crores and will turn into a big business proposition long term.
The home mortgage rates have been reduced significantly with special rates for women. Luxury apartment and villa projects are the latest trend in the development to attract globe trotting Indians and provide the same amenities they are used to abroad. These properties are marketed through exclusive road shows abroad. Our trusted partners Brigade/Legionaire group recently held a trade show in Los Angeles. Few months earlier Puravankara participated in a global roadshow in San-francisco. The NRI market is so enticing, even Steve Waugh, the former Australian captain has launched a company to sell luxury houses to Indian Expats.
For an average NRI looking to invest in apartments or row houses, the timing cannot more appropriate. There are many pre-launch offers made by the developers to minimize working capital needs. For e.g the 20:80 offer from Puravankara which requires the investor to put in 20% upfront and pay the rest after the completion or 10-75-15 offer from Brigade group where you invest 10% upfront and 75% bank loan and 15% after completion provide great savings. In addition, since we are channel partners for these organizations, there may be additional benefits. NRIs can look for a return of 20-25% while investing in such projects which could take 18-24 months for completion. For medium term investors buying plotted development the projects will get a compound growth rate of 25-30% per year. For those holding land parcels or inherited properties in cities, joint venture agreements with leading developers would enable them to convert their land into productive and income generating assets.
NRIs need to follow ground realities while investing in real estate. Property management companies are available to take care of the properties after completion. Some developers like Puravankara have their own wing to support the post maintenance of the apartments/houses. In case of venturing on your own, it is essential to verify the title deeds, revenue documents, encumberance certificates for a minimum period of 30 years, planning permission and proof of documents to get basic amenities would minimize the heartache or pain later. In addition, the NRIs need to identify their end goal prior to investing in India, whether it is for retirement or housing for the loved ones or repatriation of the sales or any other motivation. My goal in this endeavor is to assist and provide guidance in the whole process.